Jan. 23 (Bloomberg) -- A gauge of European automotive
shares, the best-performing industry group on the Stoxx Europe
600 Index last year, will drop as much as 29 percent if it fails
to break above a five-year trend line, according to a technical
analyst at HSBC Holdings Plc.

The price chart for the Stoxx 600 Automobiles & Parts Index
has formed a pattern called a rising wedge from the beginning of
the year, with successively higher peaks and higher lows
converging, Murray Gunn, head of technical analysis at HSBC in
London, said in e-mailed comments on Jan. 21. This bearish
signal indicates that the gauge of carmakers will fail to break
above a trend line connecting its intraday peak at the end of
2007 with 2011’s highest levels, Gunn said.

“There is a strong resistance zone between 370 and 386,”
Gunn said. “A failure at this resistance zone, confirmed with a
break below 352, would be bearish and target the June 2012 low
of 261 in the first instance.”

The Stoxx 600 Automobiles & Parts lost 0.4 percent to 365.1
in London yesterday, falling from its highest level since July
2011. The gauge rallied 36 percent in 2012 as the European
Central Bank unveiled a plan to buy the bonds of the euro area’s
most-indebted member states.

Still, a break above the 370-386 range would be a bullish
sign for European auto-related shares. The industry gauge might
then surge as high as 433, the record intraday level reached on
Nov. 1 2007, and a 19 percent rally from yesterday’s close,
according to Gunn.

In technical analysis, investors and analysts study charts
of price, volume and other trading data to predict changes in a
security, commodity, currency or index.